August 11, 2004 10:58 AM PDT

Blockbuster enters online DVD rental business

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Blockbuster has launched an online DVD rental service aimed directly at undercutting competition from rival Netflix.

Under Blockbuster's plan, announced Wednesday, customers can place their orders for movie rentals on the company's Web site, and their DVDs will be shipped free. Consumers can rent up to three movies at a time for a monthly subscription of $19.99, five DVDs for $29.99 a month or eight for $39.99. Netflix charges $21.99 a month for three movies at a time.

The service, which lets customers keep the rentals for as long as they like, is geared toward frequent movie renters and film buffs irked by late fees--the same target audience as Netflix.

Blockbuster said online subscribers will also get two free in-store movie rental coupons every month. The promotion is a step toward integration of its online and in-store offerings sometime next year. Such integration would allow subscribers to freely roam between online and store services, the company said.

Netflix, which last year won a patent for its online DVD rental service, currently dominates the field, with more than 1 million subscribers. But the company is feeling the heat as more competitors enter the market. In June, retail giant Wal-Mart introduced its own online movie rental service that's also priced a notch lower than Netflix's.

Blockbuster expects its new offering will boost its profits and present a challenge to its competitors. The company said that online rental subscriptions were worth about $280 million in 2003.

"The online monthly fee is currently priced below our biggest competitor for the three-out rental plan. Plus, we are offering 25,000 new release and catalog titles," Shane Evangelist, a Blockbuster vice president, said in a statement. "We believe that all of this, combined with our marketing savvy, should help Blockbuster to develop a substantial share of the online rental business by the end of next year."

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Blockbuster vs. Netflix
I've been running a head-to-head comparison of Blockbuster, Netflix and WalMart online renting for about a week and a half now. Of the three, Blockbuster is clearly running last. Their turnaround time is running about five days compared with two or three on the others. The full results are posted on WrathZone.
Posted by zaner66 (1 comment )
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